Mitch Lowe has created a monster fit for the big screen.
The chief executive of MoviePass took a sleepy, little-known, 20,000-member movie subscription service on Aug. 15 and injected pure adrenaline into its business plan.
Lowe cut the monthly, no-commitment membership fee to $9.95 from $40 to $50, enabling movie buffs to gorge themselves on as many flicks as their schedules could fit for less than a 10-spot.
In just three weeks, membership spiked to more than 400,000, Lowe told The Post in a recent interview.
“I thought it would have taken us more than six to eight months to get as many subscribers as we did in the first two days,” Lowe said.
The New York company tripled its payroll to keep up with demand and has fast-tracked plans for an updated app. One is now due in early 2018 — around the time it plans to launch an IPO.
Under its business model, MoviePass pays theaters the full price of a ticket every time a subscriber sees a movie — so there is no immediate downside for chains like AMC Entertainment, Regal Entertainment or Cinemark.
But the price cut announcement had hardly hit people’s inboxes when pundits and industry insiders were measuring Lowe for a straitjacket.
The price cut, they argue, is doomed for failure, predicting that it will never hold and the company will soon be hemorrhaging cash.
Lowe, however, predicts that subscribers will catch just over a show a month despite their newly unfettered access to the cinema. Subscribers had been averaging 3.8 times a month when they were paying $40 a month and up, he said.
With the average price of a movie in the US costing $8.65 in 2016, MoviePass will break even if Lowe’s forecast holds. The privately held company, which is looking to take itself public as soon as January, does not yet report results.
As for profits, MoviePass will soon seek to sell partnerships to restaurants and other businesses hoping to attract sales from Lowe’s subscriber base.
The $10 strategy wasn’t without hiccups.
First, AMC, the country’s largest movie chain, came out strongly against the plan, calling MoviePass a “small fringe player” and claiming the cut rate is “not in the best interest of moviegoers.”
It turns out AMC was likely in the middle of plans to roll out its own, higher-price subscription plan.
Still, Lowe has tried to make peace with AMC.
“I have attempted three times over the last two months to get in touch with AMC’s CEO, and he does not return my calls,” Lowe told The Post.
Regal and Cinemark have taken a wait-and-see approach to the $10 plan.
“A subscription program is a plus for the industry,” said B. Riley & Co. analyst Eric Wold. “The exhibitors are getting paid full price for the MoviePass-goers. That customer is now walking into the theater with extra money in their pocket that they’ll presumably then spend at the concession counter, which is a high margin for the exhibitors.”
Whether or not AMC will be able to slow down the startup’s stratospheric growth remains to be seen, but the numbers are coming up decidedly in MoviePass’ favor. The service, which had only 20,000 subscribers before it announced its new rate on Aug. 15, saw 150,000 customers sign up in the first two days, and just crossed the 400,000 threshold Tuesday.
Lowe told The Post that he has no desire to have an adversarial relationship with AMC.
“We want to be a valued member of the whole ecosystem, and they’re the largest theater out there,” he said. “We’re continuing to drive hundreds of thousands of dollars a week in ticket sales to them, and just as much in concession purchases. And we haven’t asked for anything from them other than ‘Let’s sit down and talk.’”
Ted Farnsworth, CEO of Helios & Matheson Analytics, which took a controlling stake in MoviePass before the introduction of the $10-a-month price, said the initial customer response has been extremely positive, and noted that Helios & Matheson is looking to take a larger equity stake in MoviePass before its IPO.
Currently, MoviePass is working to alleviate delays in debit card deliveries to customers that were caused when the demand far exceeded the amount their card facilities were able to produce.
He said MoviePass has more than tripled the size of its team, and that he is working to bring on executives who are experienced in the arena of customer service. He also told The Post about plans for a new app that will roll out early next year and include better customer service features as well as a tool that will let friends link their MoviePass cards together.
“Believe me, we had no intention to make people’s lives difficult,” Lowe said. “Our goal is to build a business that our customers will love and cherish for a long, long time.”